Question

Frank Johnson owned and operated an apple orchard. He used the cash method of accounting. He sold and delivered 1,000 bushels of apples to a canning factory for $2,000 but did not receive payment before his death. The proceeds from the sale are income in respect of a decedent. When the estate was settled, payment had not been made and the estate transferred the right to the payment to his widow. Also, the income was not reported on the final return of the decedent or on the return of the estate. When Frank's widow collects the $2,000, she must include what amount in her income tax return

Answer 1

Frank's widow will show $2000 as income in respect of the descent in her income tax return. Since Frank used the cash method of accounting and the income was not reported on the final return of the decedent or on the return of the estate the income should be included when it is actually received and it will be included in the Frank's widow income because she is the beneficiary and she has a right to receive it.